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If you’re looking for a gift that’s unique, memorable and could keep on giving, go shopping with your online broker. Stock market gifts may be tricky to wrap but they could prove to be quite valuable.
Beyond theoretical investment gains, stock gifts offer practical benefits to both givers and recipients.
“We love the use of stock gifts for educational purposes,” says JR Gondeck, a partner and managing director with The Lerner Group, a financial advisory. “It’s a great way to teach about the concept of saving, stock ownership and discipline, even if it’s a small amount of money.”
What’s more, your loved ones may actually prefer this gift in lieu of typical presents like gift cards, clothing, electronics or toys. In 2021, 65% of Americans said they wanted investments as holiday gifts, according to a survey conducted by MagnifyMoney.
It’s been a pretty bad year for the stock market, but that means you can give more shares at a lower price.
Here’s what you need to know about how to give stock as a gift.
How to gift a stock
You may be able to buy stock for someone in less time than it takes to go shopping at the mall. Still, it’s important to consider a few basic questions first: Who are you giving the stock to? What stock do you want to give? How much do you want to give?
Determining the “best” stock gift depends on the situation and your goals, Gondeck says. You have several options to gift stock, including:
This is one of the most straightforward ways to give stock, so long as the recipient has a brokerage account. Once you have the giftee’s personal and account information, you can initiate an electronic transfer by filling out forms through your broker. You may either transfer shares you already own, or buy shares in your account and then transfer them to the other person.
Can you gift stock on Robinhood?
Stock gifts have long been part of the model of Robinhood, a popular investing app, so you may be wondering how to gift stocks on Robinhood. New users may receive a gift of stock when signing up, and you can also earn free stock by referring other users. But Robinhood does not have a feature that allows you to gift stocks to another person. You can instead gift them cash to buy stock via the app themselves. The app does have a crypto gifting feature.
Give through an app
Non-investors can also get in on the action. Last year, Cash App unveiled a gifting option in which users can send stocks and bitcoin to other U.S.-based users — and you can do so even if you don’t own these assets. After entering the amount you’d like to send and the recipient’s information, you can search for a specific stock to give as a gift.
Buy a gift card
Buying a gift card for stock may be appealing if you or the recipient don’t have a brokerage account. With Stockpile, you can buy a gift card for an amount between $1 and $200 that’s earmarked for a specific stock (like Disney, Tesla, Amazon and Apple), index fund or cryptocurrency — or let the recipient choose their own investments.
Other ways to gift stock
There are other options for gifting stock, though they may require a bit more work. For example, you can purchase a physical stock certificate, though it may take longer to buy and come with additional costs.
Benefits of gifting stock
Not many gifts are likely to appreciate in value like stocks can. With one gift, you could spark someone’s interest in investing and potentially set them up with a long-term source of money. What’s more, stock gifts open up bigger conversations with family members, and especially children, about the importance of investing and compounding returns, Gondeck says.
Gifting stock isn’t entirely altruistic, however. It can be a tax-efficient way to transfer wealth to family members, and donating stock to charity could qualify you for tax deductions.
Who can you gift stocks to?
You can give stock market gifts to anyone including children, adult family members, spouses, friends and charities. The amount of stock you give may range from fractional shares to investments worth thousands of dollars.
You don’t have to be an active investor or invest in individual stocks to give stocks as gifts. That said, if you would like the goal to be educational, it may help if you are, since you’ll be able to explain the benefits (and risks) to the recipient.
How to gift stock to a child
Whereas family members once gave children savings bonds, the concept of stock ownership resonates with people more today, making stocks a popular way to teach children about saving for the future, Gondeck notes.
Because children aren’t allowed to own stocks on their own in most states, however, you must first open a custodial account on their behalf where you can buy investments or transfer them into the account. When the child hits the “age of maturity” — 18 or 21, depending on the state — the account ownership transfers to their name and they can do whatever they want with the assets.
If you don’t want the child to have unfettered access to these assets at the age of maturity, you may want to set up a trust instead, Gondeck notes. “It sounds complicated, but trusts are much better vehicles for donating money to minors.”
Is there a stock gift tax?
There can be a tax on stock gifts but they generally only apply to gift-givers. Even then, the gift-giver will only pay taxes if each recipient receives gifts in excess of $16,000 in 2022 or $17,000 in 2023. When the recipient eventually sells the stock, they will need to report that on their tax return.
What are the best stocks to give as gifts?
The “best” stock gift is in the eye of the beholder. Gondeck recommends gifting shares of well-established companies that have a track record of solid performance.
If education is part of your goal with this gift, it can be helpful to give shares of a company your recipient knows well — this is why a Disney stock gift is often given to children and is the top-ranked stock gift, according to GiveAShare. Other popularly-gifted stocks include Apple, Starbucks, Coca-Cola, Nike and Manchester United. No matter what stock you ultimately choose, make sure it’s one that has some long-term growth potential.
Stocks aren’t the only asset that’s ripe for giving. Exchange-traded funds (ETFs) and mutual funds can be gifted in the same way as an individual stock, while some people may be interested in gifting savings bonds again thanks to higher interest rates. Finally, you can also gift cryptocurrencies in Robinhood, Coinbase and other apps.
There are some additional considerations with gifting cryptocurrencies, and Gondeck cautions that the process can be “much trickier,” so make sure this is a gift the recipient will actually want.